Managing the risks of a limited scope retainer

The limited scope retainer: For clients anxious to minimize the cost of legal services, it's a concept whose time has come. Colloquially known as “unbundling,” the limited retainer involves splitting the usual package of work involved in a matter into discrete tasks. The client retains the lawyer to perform only some of these tasks, and maintains responsibility for the remainder.

Additional resources

Unbundling arises in a variety of contexts: litigants interested in self-representation but requiring some technical assistance; business clients keen to attend to numerous aspects of a transaction themselves; executors seeking only to have documents notarized; and numerous others. Using examples from our claim files, the following identifies the unique risks created by the limited nature of the lawyer’s retainer, and then offers some tips to help avoid them. It also provides suggestions for managing the risks created when acting only to take an affidavit or notarize a document. Ethical considerations are also noted to help you provide these services ethically and competently.

The risks

In these cases, the lawyer understood that the retainer was limited, but failed to clearly advise the client of the limits and alert the client to the consequences and associated risks of the limits. For example:

Driver #1 was sued by driver #2 for injuries suffered in a collision, and retained the lawyer to act as his defence counsel. Driver #2’s claim was dismissed when the Court unexpectedly found him at fault. Driver #1 then advised that he was injured, as well, and wanted to sue driver #2 for damages. When he discovered that the claim was res judicata, he sued the lawyer instead.

Lawyer retained by the purchasers of a lot. The lawyer accepted instructions not to obtain a copy of a right of way, but didn’t explain the potential consequences of those instructions. The lot was worth far less than the price paid, and the purchasers claimed the lawyer was at fault.

Wife retained lawyer simply to incorporate into a separation agreement, a matrimonial settlement reached separately by the parties through mediation. The wife later discovered significant assets were not disclosed by the husband, and blamed the lawyer for failing to investigate.

These failures leave the lawyer exposed to the argument that the client would have either elected to expand the retainer if the client had appreciated the limits, consequences or risks involved, or taken other protective steps.

Some matters are simply not appropriate for a limited retainer. The legal issues may be too complex, technical or critical to the outcome the client seeks. For example:

Potential commercial tenant asked the lawyer just to “take a look” at an offer to lease that the tenant was contemplating. The lawyer was unaware that the registration of such a lease would trigger significant taxes. The tenant registered the lease and then blamed the lawyer when taxes were assessed.

If the client still insists on limiting the retainer, the lawyer should refuse to act.

In these matters, a decision is reached to divide responsibility for tasks between the lawyer and the client, but there is no shared understanding or agreement about who is responsible for each specific task. For example:

Lawyer acted for an employee who had been dismissed. The employee had stock options. The lawyer understood that the employee would be responsible for ensuring that the options were exercised in time, but the employee failed to do so, lost profit on the shares, and claimed against the lawyer.

A matrimonial client asked her legal aid lawyer to act for her in another matter. The lawyer agreed only to file an Appearance. Judgment was taken in default of a defence, and the client blamed the lawyer.

Sometimes, this lack of shared understanding is even more basic, and goes to the heart of whether or not the retainer is, in fact, full or limited.

A limited retainer may result in the lawyer providing advice or services based only on information the client chooses to provide. Sometimes lawyers fail to qualify that advice by explaining that it is based on facts, circumstances and assumptions evident only from the client’s information and might change with additional information. Without this qualification, the client is unable to make an informed decision on whether or not to expand the retainer. For example:

A property owner asked a lawyer if there were any negative aspects to a sewage easement that he wanted to grant a neighbour, but limited the lawyer’s review to the information the owner provided. The owner later discovered that the neighbour was subdividing his property and that two sewer lines would run through the easement. The owner alleged that the lawyer should have warned him that the neighbour might subdivide.

Lawyer received limited instructions from a husband to attempt to resolve certain matrimonial issues. When the retainer was later expanded to pursue the division of matrimonial property, she learned that the family home had been transferred by the wife, in whose name it was registered.

Lawyer accepted a limited retainer to issue a Writ to protect a claim under a fire insurance policy. The insurer later seeks dismissal of the action on the basis that it was started prematurely, before the proof of loss was sworn. The limitation for starting a new action has since expired.

Managing the risks: Generally

In the majority of reports the Lawyers Insurance Fund receives relating to limited retainers, the problem could have been avoided through better communication by the lawyer. Explain what you will and will not do. As necessary, alert the client to any risks or consequences arising from the limitations, and advise on any qualifications to your advice. Obtain your client’s acceptance of the limited retainer on the terms discussed, and written acknowledgment from your client that he or she understands and accepts these terms.

Confirm the extent of the services you will (and will not) provide, as well as your advice and warnings, in a written retainer agreement using clear, plain language. A retainer agreement will help ensure that both you and your client are clear on the terms to which you have agreed and, in the event a claim is brought against you, will greatly assist in your defence. One lawyer, targeted by purchaser clients of a strata unit in a building under renovation on discovering that the strata corporation was unable to pay for the renovations, echoes this advice when he recommends “Be clear in writing about who is going to do what.” In that matter, the purchasers had conducted their own investigation of the strata debt, but no one had taken responsibility for ensuring that the scope of that investigation was adequate.

Sample retainer agreements are available here. Customize them as needed to deal with a specific limited retainer, and consider including: the reasons for the limited retainer; a requirement that any changes to the terms — particularly to the extent of the services provided — must be agreed to in writing; and any other obligations, such as communication and cooperation, that arise when tasks are interdependent. You will also want to consider the following:

Even with an experienced client, however, avoid making assumptions — check things out. And consider the nature of the matter. A limited role may not be appropriate if it precludes a full legal analysis of a matter. One lawyer provided limited advice on an ongoing basis to a client defending a claim brought against him by a neighbour for improperly removing trees. In fact, the municipality had advised the client that the trees were on her property. The client later blamed the lawyer for failing to advise her to third-party the municipality.

If tempted to act in these circumstances, consider that lawyer’s comment: “I will do one-off matters on a limited retainer basis, but only where there are clear ‘start and end’ parameters.” Providing services on discrete matters, rather than on matters in which the tasks of the lawyer and client are connected, tends to be less risky.

Checklists, such as the Law Society’s Practice Checklists, are very helpful in identifying who (lawyer or client) is responsible for what and ensuring that nothing slips between the cracks. Some lawyers use the Checklists when meeting initially with a client interested in sharing tasks. Each item is reviewed and initials (lawyer or client) beside the task records the agreement of who is responsible for what.

A limited retainer is no different from a traditional retainer in terms of general risk management practices you should employ. For example, you should not accept a limited retainer for a matter that you do not feel competent to handle, as you must still meet the standard of care in providing services. Anticipate and set out the terms on which the retainer will end or you can withdraw and, when your involvement is concluded, confirm it in writing. Ensure that your client’s expectations of the legal process and fees are effectively managed. Again, the Law Society’s sample retainer agreements can help you identify issues that you will want to address with any client.

Managing the risks: If acting only as a commissioner for taking affidavits or for the purpose of notarizing documents

Use of the stamp “no legal advice sought or given” when a lawyer has acted as a commissioner or notary only, provides evidence of the limits on the lawyer’s retainer. To keep that evidence unassailable you should:

Ensure your actions are consistent with the stamp’s message. Taking additional steps that belie the message, such as actually offering some advice despite the warning, may create additional duties.

Consider having the client initial the stamped message to acknowledge that it was read and understood. This will help protect you from a client who later tries to advance a position that is inconsistent with the stamp’s wording.

Consider using a second stamp that clearly states the very limited nature of the services the lawyer provided (for example, “officer certification only”).

Recognize that the stamp’s use is appropriate in some circumstances, but not all.

If a stamp is unavailable, write the words yourself or make some contemporaneous note reflecting the limits of your retainer.

Ethical considerations

Although lawyers have perennially limited the scope of their services, rules were added to the Code of Professional Conduct for British Columbia in September 2013 to provide guidance to lawyers in the delivery of limited scope retainer services. A “limited scope retainer” is defined in BC Code rule 1.1-1 as “the provision of legal services for part, but not all, of a client’s legal matter by agreement with the client.” When entering into a limited scope retainer, keep in mind the obligations in Code rules 3.1-2, 3.2-1, 3.2-1.1, 3.2-9, 7.2‑6 and 7.2-6.1 as well as Law Society Rules 3-98 to 3-109 for client identification and verification and Rules 3-59 and 3-70 regarding cash. More guidance and answers to FAQs such as ‘How do I represent myself to the client, other parties and the court?’ and ‘Do the conflict rules apply to a limited scope retainer?’ are available in the Law Society resources below.

The material above is based on Managing the risk of a limited retainer, Insurance Issues: Risk Management, Summer 2010.

Webinar

CLE-TV: Limited Scope Retainers – Practice Advice and Tips, 2014– this free one-hour presentation explores the unique opportunities that limited scope retainers present to expand your client base and improve the public's access to legal services, as well as the risks created by the limited nature of the retainer. The presenters discuss practice and ethical issues, risk management and current research and thinking, giving you the tools that you need to make limited scope retainers a valued part of your practice. And if you watch it with another lawyer, you can apply for CPD credit.

See Client Identification and Verification for resources that include a checklist, a sample attestation form for verification of identity for clients in Canada and a sample agency agreement for clients outside Canada, a free online course and detailed FAQs devoted to this topic.

Other resources

See the Practice Checklists Manual, a professional reference for BC lawyers, developed by the Continuing Legal Education Society. The checklists may assist you in organizing a record of the client’s obligations and the lawyer’s obligations in a limited scope retainer situation.